How to Handle Philanthropic In-Kind Donations

Beth Graddon

There are tax advantages that encourage giving back to the less fortunate this holiday season. It’s a tax gift that keeps on giving. But giving has taken on an interesting trend: not all donations made by charity-minded Canadians are monetary. In fact, Statistics Canada reports that 94% make in-kind donations each year, which includes items like clothing, toys, household goods, or food.

Your generous clients should be educated as documentation is still required by the Canada Revenue Agency (CRA) when in-kind donations are claimed. Gifts of service are not eligible, but gifts of new (not pre-owned) property are, in many cases, provided it’s a donation made to a registered charity. A receipt showing the fair market value of the gift is required, with any “advantage” to the donor reflected in the total.

What is an advantage and how does it impact donation-related claims? During the holiday season in particular, many registered charities will offer incentives to donors, such as event tickets, services or accommodations. When a receipt is issued for tax purposes this amount must be deducted from the fair market value when the registered charity issues it, according to the CRA.

Unless the advantage is considered nominal and is not worth more than $75 or 10 percent of the value of the donation,  it does not need to be deducted. If it’s worth more than that, but less than 80 percent of the donation amount, then the value of the advantage is deducted from the fair market value of the donation on the tax receipt. If the advantage is worth more than 80 percent of the donation amount, then a receipt cannot be issued by the charity.

Feeling inspired to learn how to help Canadian families give back? Knowledge Bureau, in partnership with the Canadian Association of Gift Planners (CAGP) and Spire Philanthropy, are pleased to announce their collaboration to introduce a new professional designation for the financial services sector.

The MFA-P™ , Philanthropy Designation  offers specialized professional credentials to enable high value planning for individual or family legacies. In this dynamic program, learn to have highly satisfying conversations with clients sooner in your relationship and address their big fears: that gifts will not be used wisely or according to personal passions and wishes. Then, provide a consistent process for giving solutions with investments that are tax-efficient, during their lifetime and as part of a personal or family legacy. Free trials of all three courses in the program are now available.

Additional educational resources: Ready to learn other tax-efficient strategies that will help give your clients the financial freedom to give back through philanthropy? Join us at the CE Summits in one of six Canadian cities this January.

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